Council could face €3m energy bill due to inflation

Soaring energy costs coupled with inflation could see a 10% to 15% drop in service delivery in Westmeath next year, warned head of finance, Jimmy Dalton.

In a chilling report to members of Westmeath County Council last week, he warned that while economic recovery from the pandemic has been rapid, “horrific” increases in energy costs and rising inflation may be “catastrophic” for the county.

If inflation continues to rise, the financial impact for 2023 could be in the region of €3m and services could be affected. He described as “horrific and unprecedented, almost indescribable”, the hikes in energy prices since the start of the war in the Ukraine.

The council signed an 18-month contract for metered electricity at the beginning of July, following a tender competition, resulting in an overall price increase of 147%, an increase of around €765,000 in a full year, or €383,000 for the rest of this year.

Mr Dalton declared, however: “The ink wasn’t dry on that report when we were advised of a hit of a further €200,000.

“I’m very disappointed to tell you that we got communication last Friday telling me that the movement in energy prices for the three weeks to Friday July 21, resulted in a 189% increase. That just serves to illustrate the volatility,” he said.

Mr Dalton warned that the council’s natural gas contract is fixed until the end of January, but based on the outcome of the metered electricity contract, the tendering of that is likely to result in an increase for 2023 of an extra €225,000.

“You could probably add another 250 grand to that, based on the latest information and indeed it could be much greater,” he said.

“I estimate that the financial impact for 2022 of increases in energy, including metered electricity, is circa €550,000,rising to €1.2m for 2023.”

Apart from turning off computers, turning off servers, turning off lights, there is not much the council can do to counteract the rising electricity costs.

“While we must take every action possible to manage our energy consumption, in the absence of additional government support, such vast increases in the cost of energy will have a significant negative impact in the framing of Budget 2023,” Mr Dalton said.

He hoped things would improve, but feared “it could get worse”.

Mr Dalton is old enough to remember the recession of the 1980s and just about old enough to remember the oil crisis in 1973, “but this is completely different and the magnitude is bordering on catastrophic”.

“Having said that, it’s only numbers, it’s only money, we are not in the middle of a war like others, but it is going to be a very significant challenge to us in terms of bringing in a budget for 2023 and indeed, living within our budget for 2022,” Mr Dalton continued.

If prices are going up, the council will get less for its money and services will be affected.

The chairman, Cllr Aengus O’Rourke, remarked that the rising energy costs were a “juggernaut” on the horizon and suggested they might need a mini budget to deal with the “catastrophic” costs.

Mr Dalton hoped a mini budget would not be needed and that they would be able to manage the situation without having to “come back and lay anything on members’ laps between now and the end of 2022”.

Cllr Paul Hogan remarked that when Jimmy Dalton mentions words like “catastrophic” he sits up and listens because that is not the sort of word you hear from the top table. He said the council should seek Government funding to offset the rising energy costs. He was assured the council is on top of this.